4 Reasons Why a Real Estate Buyer Would Get Their Deposit Back if a House Sale Falls Out of Escrow

22 Oct 2018

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4 Reasons Why a Real Estate Buyer Would Get Their Deposit Back if a House Sale Falls Out of Escrow

During a successful real estate transaction, the buyer’s deposit goes towards the final purchase price of the property. However, there are situations where the real estate buyer gets their deposit back if the house falls out of escrow.

It’s a situation neither buyer nor seller wants, but unfortunately, it’s a common occurrence in many real estate transactions. This is why earnest deposits are an important part of the real estate escrow process, as it gives buyers and sellers a degree of protection should the house sale fail to finalize.

Here are 4 reasons why the buyer would get their deposit back:

Appraisal Value is Too Low
It is possible for buyer and seller to agree on a house price but the appraisal could come back showing it is overvalued. In this situation, the buyer won’t receive financing from a mortgage provider. However, it is possible for the buyer to get their deposit back should the seller not want to lower their price.

This situation requires the buyer to have placed an appraisal as part of their contingencies during escrow negotiations. If included, then the buyer has the choice to withdraw the final offer and get their deposit back.

Inspection Issues
It is common for buyers to order a home inspection before escrow closes. Should the inspection reveal any sort of issues with the property that were not addressed initially, then the buyer is within their rights to withdraw their offer and receive their deposit back.
It’s a common occurrence as most buyers have their offer contingent on how the inspection goes. These contingencies offer lots of protection for buyers when it comes to inspections. This gives them a valid reason to pull out of the deal due to the findings of the inspection, which are included in almost all contracts.

Failure to Sell Current HomeMany buyers don’t have the financing to buy a new property until they sell their current one, leading many to place a sale contingency in the contract. Basically, they only buy the new property on the condition of selling their current property, usually within an agreed time frame.

Should this contingency be in place and the old home doesn’t sell, then the buyer will receive their earnest deposit back without any problems. Whether the seller agrees to such a contingency depends on the individual, but it’s usually accepted in most contracts.

Seller Backs Out of the Sale
A straight-forward reason that buyers get their deposit back is if the seller backs out from the deal. Regardless of the reasons for their backing out, the buyer always receives their deposit back as you would expect.

Inland Empire Escrow provides escrow services for a diverse variety of real estate transactions. With offices in Chino CA and San Bernardino CA, we quickly and professionally service all the surrounding cities such as Chino Hills, Ontario, Rancho Cucamonga, Upland, Riverside, Redlands, Colton, Grand Terrace, Yucaipa, and more. To hear more about our escrow services for residential, mobile home, short sale, REO, bulk/business sale, 1031 Exchange, or agricultural escrow, contact us today at (800) 917-9387.